Guide to Contractor Insurance

Whilst there are many factors that must be considered when making an IR35 status determination, having a substitution clause in the contract is often seen as the ‘silver bullet’. In fact, HMRC’s own Check Employment Status for Tax (CEST) tool is heavily weighted towards substitution.

Whilst the presence of a substitution clause will lend weight to the contract falling outside IR35, it is the reality of the relationship in practice which holds more weight when IR35 status is under scrutiny.

The right of substitution supports the position that the contract is for the completion of a project, rather than the services of an individual. This means that - should the need arise - another individual could be sent in to complete the project. Should personal service be enforceable, it may be an indication that it is the presence of an individual that is required, as opposed to the completion of a contract or assignment.

What is contractor insurance?

Contractor insurance protects you from a range of claims. Like any insurance, the aim is to provide financial protection against injury, along with protection for the work you offer and any equipment you use.

Do contractors need insurance?

Yes – in some cases, holding insurance is a legal requirement. And it’s a good idea even when not required, just in case something goes wrong.

Additionally, most clients expect you to have a policy before offering an assignment. Thankfully, all this is taken care of when you join an umbrella company.

Types of contractor insurance policy

There are many different types of insurance cover that you may need as a contractor. Here is a handful of those most widely held

Professional indemnity insurance

Professional indemnity insurance means you’re protected against professional negligence or negligent advice claims.

Public liability insurance

Public liability insurance protects against liability for injury to third parties (non-workers) or their property.

Employers' liability insurance

Employers’ liability insurance is designed for individuals or organisations hiring staff, to protect the employer from liability in the event of injury to, or death of, a worker.

Personal accident cover

Some umbrella companies – including Parasol – also provide their employees with personal accident insurance as part of their package. This will cover any injuries that prevent you from working.

Exemptions to contractor insurance policies

There are sometimes exemptions to insurance policies, which vary by provider. These could include the country of work, the industry you work in, your job role or underlying health problems.

With this in mind, it’s always a good idea to speak to a specialist to find the best policy for you and your line of work.

Do umbrella companies offer insurance?

Yes. Umbrella companies typically offer at least three types of insurance to cover their workers.

Contractors working through Parasol, for example, have access to industry-leading coverage, with up to £10m employers’ liability, up to £5m professional indemnity and £5m public liability.

Our Platinum customers also receive personal accident cover – up to £500 per week for injuries that prevent you from working or up to £100,000 cover for loss of life at work, and the same value lump-sum payout in severe cases.

In summary, contractor insurance helps to protect workers and employers in the event of any workplace injury or mishaps. Compliant umbrella companies will provide insurance for their employees so that you can concentrate on your assignments.

For more information on the insurance Parasol provides, please get in touch.